2020 will go down in history as the year of crazy yields and astonishing percentages in returns for investors who surfed the yield farming wave. Even though the concept of decentralized finance is still a novelty, it is impossible to deny the impact (and the buzz) cause by its rise in popularity. For those unaware, yield farming is nothing more than investors using different DeFi protocols to maximize and leverage the rate of return on invested capital. While many people think crypto is a “hold-it-forever” type of asset, yield farmers tend to disagree with simplistic and conservative strategies for investments. Harvest Finance is a platform that allows users to farm the highest yields available from several DeFi protocols automatically. Plus, Harvest optimizes yield autonomously by using the latest farming techniques.
Let’s find out more about this innovative platform.
What is Yield Farming? – Benefits and Risks
Despite the complicated strategies and multiplicity of factors involved, yield farming holds its share of benefits for those who are willing to profit with decentralized finance protocols.
Indeed, yield farmers are exposed to risk, but they are willing to expose themselves to risk because rewards make up for it. Savvy investors with the type of mind for crypto can multiply a certain amount of invested capital even 300 times using yield farming techniques.
There is also the constant exposure to bullish tokens, as yield farmers move or swap their cryptocurrency funds all the time according to token distribution, price prediction, valuation, and other types of data.
Further reading: Learn more about zero-fee DEX aggregator called ZeroSwap
Plus, it is possible to highlight the possibility to enrich crypto portfolios with different protocols, which includes lending markets, AMMs (Automated Market Makers), derivatives, DEXs, etc.
Nonetheless, the risk exists, and yield farmers must be aware of them. Strategies involving leverage involve overcollateralized loans, which can be liquidated anytime. Structure failures such as bugs in smart contracts, admin keys, structural changes, impermanent loss, and other factors also represent a huge risk.
Last, there is the possibility of hacks in liquidity pools. However, it does not matter: in the mindset of yield farmers, the riskier a strategy is, the more lucrative it tends to be.
What is Harvest Finance?
Harvest is a platform that allows investors to earn crypto by farming the highest yield available in DeFi protocols autonomously. Plus, it optimizes yield rates in returned capital using the latest farming techniques, which means its yield farming mechanisms and strategies are always evolving.
The idea came up when a team of crypto developers was looking for a convenient way to farm the latest protocols producing different token rewards.
Although yield farming can be lucrative, it is also a demanding activity, involving “manual labor” and time to move funds around different protocols. Harvest wants to help average crypto investors to take part in yield farming by simplifying the process in a few steps.
Further reading: Is MCDEX worth the hype?
Plus, the idea was set up to help users to save on gas fees, allowing people to pool their funds together in one single platform.
Harvest aims to solve this issue by delivering a single multi-purpose platform where users can farm several different protocols at the same time without handling each one individually (saving gas fees).
The platform integrates protocols such as Curve, Compound, SushiSwap, Idle Finance, Index, and Keep Network. In this sense, investors using Harvest have multiple options when it comes to yield-farming strategies.
Farming Returns Over Different Crypto Crops
The first strategy is called “FARM”, which is similar to the concept brought the Yearn Vaults. In this sense, users can deposit a certain amount of stablecoins and other cryptocurrencies in the platform pools to generate returns.
When you select the FARM dashboard, it is possible to see intuitive fields providing information such as the amount of Harvest APY per asset, the deposits (estimated in US$), and your personal balance.
There were complaints from users regarding the APY numbers showed in the FARM dashboard. Since then, the platform has been upgrading this function to ensure numbers comply with reality.
Farming fTokens and EARN
Users who deposit cryptocurrency into Harvest’ pools receive fTokens in exchange: fDAI, fUSDC, and fWBTC. These tokens are yield-bearing versions of the original assets (DAI, USDC, and WBTC), which are automatically farmed by the harvest algorithm.
All fTokens accrue value (appreciation) automatically, and users are free to redeem it for DAI, USDC, and WBTC whenever they want.
Holding fTokens permits you to use the “EARN” strategy, in which you can deposit fTokens into specific pools to earn additional rewards. Virtually, the strategy is summarized by staking LP tokens in exchange for APY (Annual Percentage Yield).
The FARM Token
Source: CoinGecko
Harvest has a unique cashflow token called FARM. The token was developed as a way to provide incentives to yield farmers in the platform, being launched at the same date the platform came out (September 1st, 2020).
The team opted for taking an autonomous path, so the token was completely bootstrapped with no pre-mining, no venture capitalists, and no investor funds.
Further reading: Learn more about Shell protocol
The circulating FARM supply at launch was zero and has a total supply over 4 years of 690,420 (new FARM tokens are minted accordingly to hard-coded rules in 4 years). Currently, the FARM circulating supply has more than 400,000 tokens.
Plus, FARM tokens are used for governance purposes as well. Even though most of the platform’s control is handled by developers, holders can vote for higher-order strategic decisions. Ironically, FARM holders do not vote on incentive distribution, strategy deployment, updates, addition or removal of vaults, etc.
Harvest Wiki – Detailed Information Available
Harvest stands out from the competition in terms of providing users detailed information about market fluctuations, token prices, updates, audits, etc. In addition to a long list of Medium articles that are constantly updated, they have an exclusive Harvest community wiki.
While most DeFi projects do not even think about providing so much information, Harvest built a wiki page where users can read about everything concerning the platform, from purpose, structure, FARM tokens, liquidity, assets, etc.
The Hack Event
On November 26th, 2020, more than US$ 30 million worth of cryptocurrencies were hacked from Harvest USDT and USDC vaults.
The attacker exploited loopholes in the code (arbitrage and impermanent loss) and flash loans to get the funds out of the protocol. The amount was swapped on Uniswap and moved into private wallets with Tornado Cash.
The Harvest team took full responsibility for errors in the engineering and ensured users that such failures would be mitigated in the future. The hacker ended up sending US$ 2.5 million of crypto assets back to Harvest, so the platform could use it to reimburse depositors.
Currently, Harvest’s smart contracts are audited by security firms Haechi, Peckshield, and CertiK.
Conclusion
Is yield farming dead yet? Not for Harvest Finance.
The platform helps users by farming the highest yield available from the best DeFi protocols automatically. The mechanism is based on a multi-protocol approach, in which yields are optimized using the latest farming techniques.
Despite the recent hack event, the platform managed to get back on track and attract users to invest in their automated yield-chasing strategies. Their goal is still to simplify things by providing an easy way for average crypto investors to benefit from complex yield farming strategies.